Internal restructure costs hurts DXC Technology Australia's FY18 results

The Australian arm of DXC Technology is still feeling the effects of Computer Sciences Corp and the enterprise services business of Hewlett Packard Enterprise merging.

DXC Technology Australia has posted statutory net loss after tax of AU$101.8 million for fiscal 2018, down from the net profit of AU$377,000 recorded during the previous financial year.

However, the company noted that without a number of one-off restructuring activities that resulted from the merger between Computer Sciences Corp (CSC) and the enterprise services business of Hewlett Packard Enterprise (HPE), underlying net profit would have been AU$11.8 million, down from the AU$29 million reported during fiscal 2017.

"Following the acquisition of DXC United Limited and global merger with the Enterprise Services segment of Hewlett Packard Enterprise, the company implemented a number of significant restructuring activities to simplify the current business model and create synergies across all service lines," the company said.

These one-off expenditures and provisions totalled AU$124 million. Of that, AU$68 million was made up of goodwill impairment, while restructuring and integration costs was AU$56 million.

The immediate parent and ultimate controlling party of DXC Technology Australia are Computer Sciences Corporation International Holdings Limited -- incorporated in the UK -- and DXC Technology Company -- incorporated in the US.  

DXC Technology Australia, which wholly-owned 91 subsidiaries during the period, paid AU$10.7 million in income tax for the year.  

Other expenses that impacted the business during the period included employee and other labour related costs, which included termination benefits and defined contribution plans for its 4,298 employees. This came in at AU$587 million, slightly less than the AU$619 million reported in FY17.

See also: Hybrid IT leads the way in HPE's revamped business strategy (TechRepublic)

Contract-related expenses was AU$357.7 million, down AU$368 million, the company's 2018 financial report stated.

Meanwhile, total depreciation and amortisation was AU$52.7 million. That accounted for AU$11.8 million of customer contracts, which was on-par with numbers recorded in 2017. 

Revenue from continuing operations for the year decreased by 5.4% from AU$1.24 billion to AU$1.17 billion.

"The decrease in revenue reflects the ongoing migration out of legacy infrastructure environments, partially offset by growth in our cloud infrastructure, Enterprise and Cloud applications, and digital workplace offerings," DXC Australia said.

DXC said however, the company's revenue from continuing operations would have been in a better state coming in at AU$2.3 billion had transactions related to its internal restructure been effective at 1 April 2017. These transactions included share transfers between XUK Holdco, ES Hague, and Continuum Europe.

Following the merger, DXC Australia acquired Sable Systems for AU$34 million and Systems Partners for AU$22 million.

Earlier this year, DXC Technology scooped up Luxoft for $2 billion to accelerate its digital growth and scale-out strategy, as well as broaden access to digital talent, with Luxoft boasting a workforce of close to 13,000 people.

Updated 10 September 2019 at 11.46am AEST: Corrected 2017 profit to AU$377,000 and 2018 revenue to reflect AU$11.8 million.  

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